Credit and Financial Safety
You have likely been bombarded with information regarding credit and what it can do for you. But what is credit? Credit is simply your ability to attain goods and services before payment, and your promise to pay in the future. You receive something while agreeing to pay back your debt at a later date (usually in smaller payments spread out over a period of time).
Before you pay someone to help you with your student loans, make sure you do your homework! Some student loan debt relief companies charge fees for services that you can get for free.
Beware of companies using deceptive methods to get you to pay up-front or monthly fees for federal student loan services that are typically offered for free by either the Department of Education or the loan servicers. These companies may offer to help you:
- Change repayment plans
- Consolidate federal loans
- Resolve defaults
- Provide other benefits and services that students are entitled to receive at no cost
These debt relief companies may give the impression that they are working for, or with, the federal government by using their logo or other identifying information, but they are not!
Interest is a type of pay-to-play model. Interest is the amount of money you pay to a lender in exchange for letting you borrow on top of the original borrowed amount. It is important to understand what kind of interest will be charged before entering into any kind of borrowing agreement.
Here’s an example:
You have a credit card that charges you 10 percent on any money you don’t pay back by the due date. Once that due date passes, you still owe them $100. That 10 percent interest will be added to your bill and you now owe them $110. The lesson here is pay back your debts on time to avoid paying extra!
Are you a current borrower? Check out your federal loan interest rates here. Private Loan interest rates are available through your specific lender.
A person with good credit has a demonstrated history of paying back their debt. You can demonstrate this by paying on time and in full and not creating an over-draft on your checking account. Companies will be willing to lend a person money if they can see that he or she will likely pay it back without issue.
A person with poor credit may have had difficulties paying back debts at the time of borrowing. Therefore, companies would be hesitant to grant that person any good or service without upfront payment because he or she has not demonstrated that they are capable of paying back their debt in a reliable or timely way. You can request your credit report for free once per year.
Well, that seems simple, right? Now how do lenders determine whether they:
a.) Will allow you to acquire something on credit?
b.) Will they determine the terms of your borrowing?
In order to figure out if you can borrow something on credit that company will do its research. This typically includes examining your credit report and your credit score. Your credit report includes all the details of your borrowing history. You can request your credit report for free once per year.
The better your history of paying back money owed the higher your credit score. It’s important to know your credit score. You can check your credit for free every 12 months. Paying back debts on time and in full will make your credit history better and increase your score, so if you have debt, that should be your focus.
Identity theft occurs when someone else willfully assumes your personal information to gain access to your benefits. This can include getting loans, credits cards or other financial services in your name. These thieves have the potential to destroy credit and cause significant, long-lasting financial issues for their victims.
Here are some major warning signs of identity theft according to the Federal Trade Commission’s Identity Theft site.
Clues That Someone Has Stolen Your Information
- You see withdrawals from your bank account that you can’t explain.
- You don’t get your bills or other mail.
- Merchants refuse your checks.
- Debt collectors call you about debts that aren’t yours.
- You find unfamiliar accounts or charges on your credit report.
- Medical providers bill you for services you didn’t use.
- Your health plan rejects your legitimate medical claim because the records show you’ve reached your benefits limit.
- A health plan won’t cover you because your medical records show a condition you don’t have.
- The IRS notifies you that more than one tax return was filed in your name, or that you have income from an employer you don’t work for.
- You get notice that your information was compromised by a data breach at a company where you do business or have an account.
If you are the victim of identity theft it is important to act immediately. Follow the directions on https://www.identitytheft.gov right away to limit potential damages.